II 109th CONGRESS 1st Session S. 1091 IN THE SENATE OF THE UNITED STATES May 20, 2005 Mr. Salazar introduced the following bill; which was read twice and referred to the Committee on Energy and Natural Resources A BILL To establish a Federal incentive program as part of a national gasification strategy to stimulate commercial deployment of integrated gasification combined cycle and industrial gasification technology.
1.
Short title
This Act may be cited as the National Gasification Strategy Act of 2005.
2.
Purpose
The purpose of this Act is to establish a Federal incentive program as part of a national gasification strategy to stimulate commercial deployment of integrated gasification combined cycle and industrial gasification technology in order to— (1)develop gasification as a gas supply option that provides the energy equivalent of 1,500,000,000,000 cubic feet of natural gas; (2)promote the use of domestic coal, biomass, petroleum coke, and other domestic fuel resources; (3)reconcile coal use and environmental protection; (4)reduce the demand pressure on domestic natural gas prices and supply by promoting the use of gas derived from domestic coal and biomass and other domestic fuel resources for electric generation and industrial use; (5)provide affordable and reliable electricity and gas supply; (6)promote the position of the United States as a global leader in advanced gasification technology and carbon capture and storage technology; and (7)accomplish the goals described in paragraphs (1) through (6) while minimizing the burden on the Federal budget.
3.
Definitions
In this Act: (1)
Biomass
(A)
In general
The term biomass means— (i)an animal, agricultural, or plant waste; and (ii)forestry materials, including wood wastes, forest thinnings, and the residuals and byproducts of wood harvest or conversion. (B)
Exclusion
The term biomass does not include paper that is commonly recycled. (2)
Carbon capture ready
The term carbon capture ready means, with respect to a project, having a design that is determined by the Secretary to be capable of accommodating the equipment likely to be necessary to capture the carbon dioxide that would otherwise be emitted in flue gas from the project. (3)
IGCC project
The term IGCC project means an integrated gasification combined cycle project with respect to which, during the term of the loan guarantee under the program for the project or, in the case of a grant, the useful life of the project, as determined by the Secretary— (A)except as provided in section 4(c)(4), coal will account for at least 75 percent of annual heat input; and (B)electricity will account for at least 75 percent of annual useful energy output. (4)
Industrial gasification project
The term industrial gasification project means a project with respect to which, during the term of the loan guarantee under the program for the project or, in the case of a grant, the useful life of the project, as determined by the Secretary— (A)coal, biomass, or petroleum residues, in any combination, may account for annual fuel heat input; and (B)electricity will account for less than 75 percent of annual useful energy output. (5)
Natural gas combined cycle power plant
The term natural gas combined cycle power plant means a system that— (A)comprises 1 or more combustion turbines, heat recovery steam generators, and steam turbines; and (B)combusts at least 90 percent natural gas for the annual fuel heat input of the system for any year. (6)
Program
The term program means the Federal incentive program established under section 4(a). (7)
Project
The term project means— (A)any combination of equipment located at a specific site for an IGCC project or industrial gasification project that is used— (i)to gasify coal, biomass, or petroleum residues; (ii)to remove pollutants from the resulting gas; (iii)to use the resulting gas for industrial purposes or burn the resulting gas in a turbine to generate electricity; and (iv)to remove pollutants from the resulting flue gas; (B)a combined cycle power plant refueled using the equipment described in subparagraph (A) that is in existence on the date of enactment of this Act; or (C)an industrial gasification project that uses the equipment described in subparagraph (A). (8)
Secretary
The term Secretary means the Secretary of Energy. (9)
Total plant investment
The term total plant investment means, with respect to a project, the aggregate amount of— (A)engineering, procurement, and construction costs; (B)costs incurred by the owner of the project in developing and starting up the project; (C)construction financing costs; and (D)any contingency reserves.
4.
Federal incentive program
(a)
Establishment
Not later than 1 year after the date of enactment of this Act, the Secretary shall establish a Federal incentive program under which the Secretary shall provide loan guarantees and grants for projects selected in accordance with this Act. (b)
Eligible projects
The owner of a proposed project that seeks to receive a loan guarantee or grant for a project under the program shall submit to the Secretary, in accordance with such procedures as the Secretary shall establish by regulation, an application that demonstrates that the project— (1)if the proposed project is an IGCC project, will be— (A)a new power plant; (B)a repowering of an existing coal-fired power plant; or (C)a refueling of an existing natural gas combined cycle power plant; (2)will comply with enforceable emission limitation requirements, in addition to any other applicable Federal or State emission limitation requirements, that the project attain at least— (A)total sulfur dioxide emissions in flue gas from the project that do not exceed 0.04 lb/mmBtu; (B)a 95-percent removal rate (including any fuel pretreatment) of mercury from the coal-derived gas, and any other fuel, combusted by the project; (C)total nitrogen oxide emissions in the flue gas from the project that do not exceed 0.05 lb/mmBtu; and (D)total particulate emissions in the flue gas from the project that do not exceed 0.01 lb/mmBtu; (3)will be carbon capture ready; (4)in the case of an application for a loan guarantee, will have an assured revenue stream and other credit enhancements that provide credit and Federal budget scoring that is acceptable to the Secretary and the Office of Management and Budget (in accordance with the purpose and goals described in section 2); and (5)has obtained— (A)approval by the appropriate regulatory commission of the recovery of the cost of the project; or (B)a power purchase agreement, or a letter of intent relating to such an agreement, that has been approved by the board of directors or appropriate oversight authority of, and executed by, a creditworthy purchasing party, as determined by the Secretary. (c)
Selection of projects
(1)
In general
The Secretary shall— (A)establish, by regulation, review and approval criteria and procedures for selecting a proposed project to receive a loan guarantee or grant under the program; and (B)select projects for receipt of loan guarantees and grants in accordance with those criteria. (2)
Diversity
In applying the review and approval criteria to each proposed project, the Secretary shall ensure, to the maximum extent practicable, that the portfolio of projects for which loan guarantees or grants are provided under the program will result in— (A)gasification of a diversity of coal types (including subbituminous coal) and other fuel types; and (B)a geographic diversity of projects. (3)
Limitation
The Secretary shall issue a loan guarantee for a proposed project only if the loan guarantee for the project under the program has a budget score under the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.) that, as determined by the Office of Management and Budget, does not exceed the product obtained by multiplying— (A)an amount equal to the total plant investment in the project; and (B)such percentage level for budget scoring as shall be established by the Office of Management and Budget in accordance with the purpose of this Act. (4)
Certain IGCC projects
The Secretary may select under this subsection not more than 2 IGCC projects with respect to which, during the term of the loan guarantee under the program for the project or, in the case of a grant, the useful life of the project, as determined by the Secretary, biomass or petroleum residues may account for at least 75 percent of annual heat input. (d)
Commencement of construction
The Secretary shall require construction on a project for which a loan guarantee or grant is provided under the program to commence not later than the date that is 3 years after the date of issuance of the loan guarantee or grant. (e)
Provision of loan guarantees and grants
(1)
Loan guarantees
Each loan guarantee provided for a project under the program shall— (A)cover up to 80 percent of the total plant investment in a project selected under subsection (c), on the conditions that— (i)the owner of the project provides equity investment in the project of at least 20 percent of the total plant investment; and (ii)for purposes of applying the percentage requirements under clause (i), the amount of the total plant investment shall be reduced by the dollar amount of any Federal grant provided for the project under the program; (B)apply to the long-term debt obligations for the project, which obligations— (i)may, at the discretion of the Secretary, be nonrecourse obligations; and (ii)shall have a term of up to 30 years; and (C)be backed by the full faith and credit of the United States. (2)
Grants
(A)
In general
Each Federal grant provided for a project under the program shall— (i)be provided for a project only to the owner of the project, in whole or in part, that is a Federal, State, or local governmental entity or rural electric cooperative; and (ii)cover not more than 20 percent of the portion of total plant investment contributed by the Federal, State, or local governmental entity or rural electric cooperative for the project. (B)
Exception
The limitation described in subparagraph (A)(ii) shall not apply to any portion of investment or operating costs relating to the capture and storage of carbon dioxide. (3)
Limitations
The Secretary may provide, or certify an eligible project to receive, loan guarantees or grants for a project if the aggregate scored value (as determined by the Office of Management and Budget) of incentives made available to IGCC projects and industrial gasification projects does not exceed— (A)$200,000,000 for each project receiving incentives under this title; and (B)20 percent of the total plant investment of each project receiving incentives under this title. (f)
Regulations
Not later than 1 year after the date of enactment of this Act, the Secretary shall issue regulations to carry out the program, including, at the discretion of the Secretary, regulations that establish— (1)conditions for the disbursement of funds for loan guarantees or grants provided under the program; (2)procedures and requirements for monitoring and reporting the status of projects, or of research, development, demonstration, or commercial deployment under projects, for which loan guarantees or grants are provided under the program; (3)procedures for taking actions to restrict the impact on the Federal budget in the event of foreclosure of a project provided a loan guarantee or grant under the program; and (4)application, insurance, and other fees, including schedules for the payment or collection of the fees, to cover administrative costs incurred, and the burden placed on the Federal budget, in carrying out the program. (g)
Authorization of appropriations
(1)
Carbon capture and demonstration projects
(A)
In general
Subject to subparagraph (B), there is authorized to be appropriated for providing loan guarantees or grants for projects involving the capture or storage of carbon dioxide under the program— (i)$250,000,000 for fiscal year 2006; (ii)$150,000,000 for each of fiscal years 2007 through 2009; and (iii)$100,000,000 for each of fiscal years 2010 through 2012. (B)
Specific projects
Of each amount made available under subparagraph (A) for a fiscal year— (i)1/3 of the amount shall be used for providing loan guarantees or grants for projects involving research, development, and demonstration of technology for— (I)the capture and storage of carbon dioxide; (II)biomass gasification; or (III)gasification of subbituminous or lignite coals; and (ii)2/3 of the amount shall be used for providing loan guarantees or grants to support the commercial deployment of technology for capture and storage of carbon dioxide from projects for which loan guarantees or grants are provided under the program. (2)
IGCC and industrial gasification projects
(A)
Authorization of appropriations
Subject to subparagraph (B), there is authorized to be appropriated for providing loan guarantees or grants for IGCC projects and industrial gasification projects under the program— (i)$500,000,000 for fiscal year 2006; (ii)$300,000,000 for each of fiscal years 2007 through 2009; and (iii)$200,000,000 for each of fiscal years 2010 through 2012. (B)
Specific projects
Of each amount made available under subparagraph (A) for a fiscal year— (i)not more than 50 percent shall be used for providing loan guarantees for industrial gasification projects; and (ii)the remaining amount shall be used for providing loan guarantees or grants for IGCC projects, of which— (I)at least 1/3 of the amount shall be used for providing loan guarantees or grants for IGCC projects that involve existing natural gas combined cycle power plants refueled using gasification of coal, biomass, or petroleum residues; and (II)not more than $30,000,000 may be used for providing Federal grants for IGCC projects.
5.
Integrated western coal/high altitude carbon minimization-sequestration energy system
(a)
In general
Subject to the availability of appropriations, the Secretary shall provide financial assistance (including grants and loan guarantees) for a project to produce energy from coal mined in the western United States using appropriate advanced integrated gasification combined cycle technology, including repowering of existing facilities, that minimizes and offers the potential to sequester carbon dioxide emissions. (b)
Specifications
The project— (1)may be built in stages; (2)shall have a combined output of at least 100 megawatts; (3)shall be located in a western State at an altitude greater than 4,000 feet; and (4)shall use coal with an energy content of not more than 9,000 Btu/lb. (c)
Federal share
The Federal share of the cost of the project shall not exceed 50 percent. (d)
Technical criteria
Technical criteria for a project under a clean coal power initiative carried out by the Secretary shall apply to the construction of the project. (e)
Fees
The Secretary may establish by regulation application, insurance, and other fees, including schedules for the payment or collection of the fees, to cover administrative costs incurred, and the burden placed on the Federal budget, in carrying out this section.